I INTRODUCTION

Wealth and succession planning for Brazilian individuals continues to be in high demand.

The approval of a tax amnesty programme at the beginning of 2016, the increase of inheritance and gift tax by several states, in addition to propositions under discussion at the Brazilian National Congress for the creation of a federal inheritance and gift tax, the increase of the maximum rate, or even the creation of a wealth tax caused many individuals to review their options.

II TAX

Brazilian-resident individuals are subject to taxes on a worldwide basis, which means they must submit to taxation in Brazil all income and gains obtained, irrespective of whether they derive from domestic or foreign sources. Income taxes with respect to individuals are triggered upon the acquisition of economic or legal availability of income and other gains, regardless of whether the relevant funds are remitted to Brazil.

i Income tax

In general, income received by Brazilian-resident individuals is subject to taxes on a progressive basis. Applicable rates vary from zero per cent to 27.5 per cent depending on the amount accrued. A rate of 27.5 per cent applies to annual income in excess of 55,373.55 Brazilian reais.

Brazilian-resident individuals are entitled to utilise the amount of taxes paid abroad as a credit against the income tax due in Brazil, subject to the existence of a double taxation treaty2 or evidence of reciprocal treatment.3 However, the amount of such credit shall be limited to Brazilian income tax liability on the income received. If the income received is subject to a higher rate in the foreign jurisdiction, the excess amount paid abroad will not be permitted to be used in Brazil to offset other taxes.

ii Capital gains tax

Capital gains realised by Brazilian-resident individuals are currently subject to tax in Brazil at a 15 per cent flat rate. However, as from 1 January 2017, capital gains shall be subject to capital gains tax of 15 per cent to 22.5 per cent on a progressive basis, depending on the total amount of the gain, and regardless of whether the relevant right or asset is located in Brazil or abroad.

Capital gains are taxed separately and definitively, being related transactions involving the same relevant right or asset, in the same calendar year, that are considered as one single transaction for tax purposes and that trigger tax at a rate between 15 per cent and 22.5 per cent, as outlined above.

When a foreign asset or right is acquired with income earned originally in Brazilian currency, the calculation of the amounts due for tax purposes takes into consideration the variation of the exchange rates in effect at the time the asset or right was acquired and at the time of the disposition of such an asset or right.

On the other hand, if the asset or right is acquired with income originally earned in foreign currency, the only taxable gain would be the one in foreign currency, which is converted into Brazilian currency using the exchange rate in effect on the date of disposition of the right or asset. This means that the exchange variation rate does not affect the basis for the calculation of Brazilian tax.

iii Tax on financial investments

The taxation of financial investments in Brazil made by Brazilian-resident individuals varies depending on the term and nature of the investment. Net gains on stock market transactions, as well as gains in other equity-related markets in stock exchanges and organised over-the-counter markets, and gains deriving from stock mutual funds,4 are currently subject to Brazilian income tax at a 15 per cent flat rate.5

Fixed-income financial investments in Brazil, including hedge funds, are, however, subject to taxation in accordance with their respective investment term: (1) up to 180 days: 22.5 per cent; (2) between 181 and 360 days: 20 per cent; (3) between 361 and 720 days: 17.5 per cent; and (4) above 720 days: 15 per cent.

For the purpose of Brazilian tax laws, the applicable tax rates in connection with investments made by a Brazilian-resident individual in a domestic fund will depend on the term and nature of such an investment, as outlined above, as opposed to investments of a Brazilian-resident individual in a foreign fund, which, regardless of its nature or term, is currently subject to Brazilian capital gains tax at the rate of 15 per cent.

iv Tax exemption for certain foreign assets

Provisional Decree No. 2,158-35, of 24 August 2001, establishes that if a non-resident individual acquires tax-resident status, gains realised from rights and assets acquired prior to the granting of resident status are only subject to taxation in Brazil if such rights or assets are located in Brazil.

Accordingly, gains realised by a Brazilian-resident individual on the sale of rights or assets located abroad and acquired while not a tax resident for Brazilian tax laws purposes are exempt from taxation in Brazil.

v Absence of controlled foreign company (CFC) rules for individuals

Brazil has not yet passed laws and regulations with respect to foreign companies controlled by Brazilian-resident individuals (i.e., CFC rules). Accordingly, it is possible for a Brazilian-resident individual to defer taxes indefinitely until such time as the profits accumulated are distributed to the individual. Profits or dividend distributions from foreign sources are taxed on a progressive basis at the standard income tax rates (zero per cent to 27.5 per cent).

Although there are currently no CFC rules for Brazilian-resident individuals in force in Brazil, the expectation is that a change in Brazilian tax laws to include such provisions will be implemented in the future. Such a change would require the review of Brazilian-resident individuals foreign structures and discussions on alternative planning.

vi Gift and inheritance tax

Gift and inheritance taxes are governed by state laws. The rates vary from state to state and may not exceed 8 per cent. In the state of São Paulo the applicable rate is 4 per cent.

The tax basis is the market value or, in the case of interests in privately held companies, the net equity value of the relevant company.

There is a discussion on the legality of taxation of gift and inheritance taxes when the donor or deceased transfers foreign situs assets. According to the Brazilian Constitution, a complementary law, which requires a higher quorum for approval, should be enacted to govern taxation in such cases. Most states have passed legislation to regulate taxation in such cases, which is understood as being in violation of the federal constitution. There are a few court precedents recognising the illegality of the charging of gift and inheritance taxes in such cases, but a final interpretation on this matter is far from being resolved.

In 2015, 11 states passed legislation to increase the rates of gift and inheritance tax; among them, the state of Rio de Janeiro increased the maximum rate to 5 per cent.

vii Wealth tax

The Brazilian Constitution permits the imposition of taxes on wealth. Despite efforts by a few congress representatives from time to time, currently there is no law to regulate the imposition of such taxes in Brazil.

viii Brazilian Amnesty Programme for Undisclosed Overseas Assets (Federal Law No. 13,254/16)

On 13 January 2016, the president sanctioned Law No. 13,254, which establishes the Brazilian Tax Regularisation Programme (Law No. 13,254/16) and allows Brazilian tax residents and non-residents, who were Brazilian tax residents on 31 December 2014, to report their non-declared assets held abroad on 31 December 2014, by paying an income tax of 15 per cent over the market value of the regularised assets and a regularisation fine of 100 per cent over the income tax. The participants are not required to remit the regularised assets to Brazil.

The programme does not apply to (1) persons convicted for any crimes targeted by the law; and (2) to holders of positions, jobs and functions of a public nature of direction or elective, or the respective spouses and relatives by blood or by law, until the second degree or by adoption, on 13 January 2016.

The assets that may be regularised include bank deposits, shares of investment funds, financial instruments, insurance policies, loans, interests in the capital of entities, with or without legal personality, intangible assets of any nature, real estate, vehicles, aircrafts, vessels and other moveable assets.

The term to adhere to the programme is from 4 April 2016 to 31 October 2016. The fulfilment of the conditions to join the Regularisation Programme shall cause the amnesty of the crimes of tax evasion, including by means of omitting or providing false or misleading declarations to the tax authorities, fraud or falsification of public or private documents or use of false documents, currency evasion linked to tax evasion and money laundering if the object of the crime is an amount, asset or right originated from the aforementioned crimes.

The reporting made in connection with the Regularisation Programme shall not be used as the sole evidence or element for the purposes of an investigative initiative or criminal procedure, or to support, directly or indirectly, any administrative procedure of a tax or exchange control nature relating to the assets reported therein.

III SUCCESSION

Succession planning structures for high net worth individuals in Brazil may be set up either domestically or abroad, depending on the types of assets held and where they are located.

In general, any type of structure valid and enforceable under applicable laws should be recognised as valid and enforceable in Brazil, unless it violates matters of public policy, national sovereignty or good practices. Accordingly, trusts, foundations, companies, investment funds and partnerships are commonly involved in succession planning structures in Brazil to avoid or simplify probate proceedings, to the extent possible, and optimise tax results.

Although the Brazilian legal system does not feature any legal concept equivalent to a trust, pursuant to applicable Brazilian conflict laws, a trust validly set up abroad comprising non-Brazilian assets may be recognised within the country and thus be used as an alternative for succession planning.6 The lack of provisions under Brazilian tax laws, however, generates debate among practitioners with respect to the relevant tax treatment for transfers made to trusts and from the trustees to the beneficiaries. As a result, careful consideration should be given when determining whether a trust is the appropriate structure to be adopted.

Most domestic succession planning structures involve combinations of holding companies, exclusive investment funds, lifetime gifts, creation of usufructs, execution of wills, life insurance and pension funds. All types of succession or inheritance agreements, however, are deemed null and void in Brazil pursuant to Article 426 of the Brazilian Civil Code.

i Forced heirship rules

Brazil is a civil law jurisdiction where, because of forced heirship rules, certain family members cannot be validly left out of an individual’s succession. Therefore, when Brazilian resident individuals directly holding moveable or immoveable assets located in Brazil are involved, succession must be planned in a way in which forced heirs have no grounds to challenge it based on such rules.7

Descendants (children, grandchildren, great-grandchildren etc.), ascendants (parents, grandparents, great-grandparents etc.) and the surviving spouse benefit from the protection granted to forced heirs under Brazilian law and are entitled to at least 50 per cent of the deceased’s assets – the mandatory portion of the estate. Descendants have priority over other forced heirs but may have to share the mandatory portion of the estate with the surviving spouse depending, however, on the marital asset regime adopted. Ascendants may only inherit the mandatory portion of the estate in the absence of descendants and must share the mandatory portion with the surviving spouse, regardless of the marital asset regime adopted. The surviving spouse, in turn, will inherit the mandatory portion of the estate in its entirety in the absence of descendants and ascendants.

Mainly due to the extension of succession rights granted to the surviving spouse as of 2003, when the current Brazilian Civil Code came into force and included the surviving spouse among forced heirs, succession planning in Brazil must also take into account (1) the marital asset regime under which an individual is married, and (2) whether the individual lives in a situation that may be construed as companionship under Brazilian law.

A marital regime with a complete separation of assets commonly simplifies succession planning in Brazil, and individuals who are not married under such a regime may adopt it in a relatively expeditious judicial proceeding, provided that both spouses and the competent court agree to its terms, and provided that all creditors’ rights prior to the asset regime modification are respected.

There is a relevant precedent to be taken into consideration for succession planning when the marital regime adopted is one of complete separation of assets. According to the Brazilian Civil Code, if married under such a regime, the surviving spouse will share the inheritance (at least the mandatory portion) with the descendants. However, despite such literality of the law, the Brazilian Superior Court of Justice decided in 2009, in a then leading case, that the spouses’ wish to adopt a marital asset regime with a complete separation of assets, expressed within their prenuptial agreement, should be binding not only during the spouses’ lifetimes, but also upon the death of one of the spouses. Based on such a decision, the surviving spouse should not benefit from any of the assets comprising the estate of the deceased.

The Brazilian Superior Court of Justice had been applying such understanding until a turnover case in 2014, when it decided that the surviving spouse married under a complete separation of assets regime should be considered a forced heir and inherit a share of the deceased’s estate, in accordance with the literality of the Civil Code. The matter is not yet completely settled and is subject to appeal.

Another relevant precedent to be taken into consideration relates to the marital regime of the partial communion of assets. Although the provisions of the Brazilian Civil Code are not as clear and literal with respect to the succession rights of a surviving spouse married under such a regime, there has been a general interpretation that the surviving spouse would be entitled to share with the descendants the individual assets of the deceased spouse (i.e., assets that were not jointly owned by the spouses).

However, in 2013, the Brazilian Superior Court of Justice decided that the intent expressed by the spouses of only sharing property acquired after the marriage should also apply to their causa mortis succession, so that spouses married under a partial communion of assets regime should be entitled to inherit only common assets (in competition with descendants), and private assets should be divided only between the descendants. This precedent is no longer aligned with the latest Superior Court of Justice’s understanding of 2014, that in the event of succession under a regime of complete separation of assets, the surviving spouse shall be considered a forced heir in accordance with the Civil Code, despite the intent expressed by the spouses to separate their assets during their lifetime.

ii Companionship and same-sex companionship

Pursuant to Article 226(3) of the Brazilian Constitution, a companionship is expressly recognised as a legitimate family protected by Brazilian law, which will facilitate its conversion into a legal marriage. In turn, a companionship is defined under Brazilian law as a public, uninterrupted and lasting relationship with the purpose of forming a family. Based on a systematic and teleological interpretation of fundamental rights and principles such as equality, non-discrimination, dignity and free family planning contemplated by the Brazilian Constitution, the Brazilian higher courts recently also recognised same-sex companionships as legitimate, opening the possibility of same-sex marriage.

Individuals who live in a situation that may be construed as a companionship are advised to, while planning their succession, also execute a companionship agreement under which the companionship is expressly recognised and a regime of complete separation of assets is adopted.

A companionship in Brazil entails succession rights and a relevant matter in connection with this is whether Brazilian higher courts will deem that such rights are the same as those arising from a legal marriage. As of the implementation of Law No. 8,971 of 29 December 1994, and until the current Brazilian Civil Code came into force in 2003, succession rights granted to spouses were mainly extended to companions. At the same time that it extended succession rights granted to spouses, however, the current Brazilian Civil Code surprisingly materially limited succession rights granted to companions. For example, differently from spouses, companions are not deemed forced heirs. Many Brazilian lower courts – São Paulo’s and Rio de Janeiro’s among them – have already decided, based on the terms of the Brazilian Federal Constitution, that actually there is a hierarchy between marriage and companionship and that different succession rights granted to spouses and companions do not violate the constitutional principle of equality. Nevertheless, since the matter relates to a constitutional principle, the Brazilian Supreme Court is now reviewing a leading case and will decide the matter, which may reverse such decisions.

In May 2013, the National Justice Council, considering the current standpoint of both the Supreme Court and the Superior Court of Justice on same-sex civil union and marriage respectively, passed a resolution prohibiting registration offices from declining marriage licences to same-sex couples. The resolution has added a degree of legal certainty to the registration of same-sex marriages in Brazil.

iii Probate procedure

As well as Brazilian-resident individuals, the aforementioned matters related to Brazilian forced heirship rules also concern individuals domiciled abroad who hold directly moveable or immoveable Brazilian assets.

Where directly held moveable or immoveable assets located in Brazil are involved, the causa mortis transfer of such assets to heirs shall be subject to a probate proceeding within the country, regardless of the individuals’ or the heirs’ domicile, nationality, or the existence of a valid will. Brazilian courts have sole and exclusive jurisdiction over the causa mortis transfer of assets located in the country, pursuant to Article 23(II) of the Brazilian Civil Procedure Code and therefore do not enforce any foreign decisions relating to this matter.

Conversely, based on Brazilian higher courts case law, a probate proceeding in Brazil should not comprise assets located abroad, even when the deceased was a Brazilian resident or a Brazilian national.

However, although Brazilian courts will not have jurisdiction with respect to the partition of assets located abroad, there have been precedents set by the Superior Court of Justice that indicate that such assets shall be taken into consideration by Brazilian courts for purposes of compensation between heirs and to guarantee compliance with Brazilian forced heirship rules.

IV WEALTH STRUCTURING & REGULATION

i Common vehicles

Wealth structuring in Brazil has developed significantly over the years.

Brazilian individuals, companies and investment funds are authorised to make investments abroad. The possibility of combining funds of funds8 or hedge fund-type funds with other types of regulated investment funds, such as private equity funds, receivable funds and real estate funds, allowed local investment funds to invest in certain classes of non-financial assets, such as shares of privately owned companies, receivables and real estate properties, which were otherwise not allowed.

Within such a framework, and considering the experience and capability of local financial institutions and investment advisory firms to assist their clients and provide the necessary platform, Brazilian individuals are able to use a wide variety of vehicles and structures to achieve their needs, be it wealth preservation, investment and risk diversification, family governance, asset protection or succession planning.

Such planning structures for private clients in Brazil may be set up either domestically or abroad. In general, any type of structure valid and enforceable under applicable laws where such a vehicle or structure was created or formed should be recognised as such in Brazil unless it violates matters of public order, national sovereignty or good practice. Accordingly, trusts, foundations, companies, investment funds and partnerships are commonly involved in wealth and succession planning structures for Brazilian private clients.

The three main vehicles used by Brazilian-resident individuals for investing abroad are local investment funds, foreign companies and partnerships, and foreign investment funds. Trusts and foundations are used by Brazilian-resident individuals in connection with certain special needs, but, as already indicated, a careful review of the needs and potential consequences must be undertaken because of a lack of clarity on the tax treatment in connection with transfers made from the individual to the structure and from the structure to the beneficiaries. A full review of forced heirship rules, gift and inheritance taxes, as well as income tax consequences, is required to define whether such alternatives are appropriate considering the facts and circumstances.

With the ability of local investment funds to invest up to 100 per cent of their assets in foreign securities, such vehicles are now being used by local individuals to concentrate their wealth in a single umbrella fund, making investments in a wide range of assets, including interests in operating businesses, real estate properties, hedge funds, stocks, bonds and other securities, in Brazil and abroad, without concentration limits. If properly structured as a closed-end fund, it is possible to defer taxes indefinitely, with investors currently subject to capital gains taxes at the rate of 15 per cent upon redemption of interests in the fund.

For Brazilian-resident individuals who prefer to invest directly abroad, companies and partnerships continue to be attractive as it is possible to legally defer taxes until such time as the profits are made available to the interest holder. Certain partnership structures are flexible enough to encompass succession-planning features in their governing documents. Some jurisdictions would even permit the transfer of the interests in such partnerships to pass on to the relevant heirs without the need for probate proceedings.

The use of foreign funds by high net worth individuals is increasing as well. With the knowledge and experience accumulated from investments in local investment funds, such individuals are now seeking to create similar types of structures abroad. The benefits of investing in foreign investment funds include tax deferral, improved governance and substance in their place of incorporation, typically involving a local administrator and custodian, an auditor and local board members. Such factors also contribute to a better governance structure for families as the service providers involved are required by law to adopt proper controls and governance provisions.

ii Reporting obligations

Brazilian-resident individuals are required to file a tax return on or before the last business day of April every year, where they will report not only all income and capital gains realised throughout the previous year, but also all rights and assets held on 31 December of that year, in Brazil and abroad.

Additionally, Brazilian-resident individuals must report all assets held abroad to the Brazilian Central Bank, in accordance with the form, periodicity and conditions set out by the applicable regulation.

All individuals holding the equivalent of US$100,000 or more must file a form, between 15 February and 5 April, with the Central Bank of Brazil through an online system. In this form, all assets held on 31 December of the previous year must be identified. For individuals holding assets abroad in excess of US$100 million, this reporting obligation is also required to be observed quarterly between 30 April and 5 June, 31 July and 5 September, and 31 October and 5 December, in relation to, respectively, all assets held on 31 March, 30 June and 30 September.

Assets reported to the Brazilian Federal Revenue take into account their respective acquisition cost.

The Central Bank requires individuals to report the market value of their foreign assets or the net worth of companies if it is not possible to assess the market value.

The market value may be assessed by any method of appraisal of the fair market value of the asset, such as market price if publicly traded, or value in a recent transaction with a non-related party. Only if it is not possible to make such an assessment, may the net asset value of the direct or equity portfolio investment or the acquisition cost of the debt portfolio be reported as the market value. In the case of a foreign company reported on the basis of its net worth, the Central Bank requires that the net worth is determined according to international financial reporting standards.

The difference between the reporting obligations to the Federal Revenue (cost value) and the Central Bank (market value) has been a point of concern for Brazilian-resident individuals as it evidences the discrepancy between the acquisition cost and the market value of the asset. The key driver for this concern relates to confidentiality. Most Brazilian-resident individuals are afraid that the real value of their wealth may become known to other authorities or unauthorised persons.

iii Anti-money laundering regime

On 10 July 2012, Brazil, like other leading jurisdictions, amended the law relating to money laundering prevention (Law No. 9,613, dated 3 March 1998, as amended). The new Brazilian anti-money laundering regime is similar to those regimes observed in other countries in the sense that the product of any crime may be subject to punishment pursuant to applicable anti-money laundering laws and regulations. Before the amendment to the law only a closed list of crimes were subject to criminalisation for money laundering.9

In general, any individual or company involved with transactions relating to the acquisition, management or disposition of assets, including, without limitation, financial institutions and advisory firms generally, are required to maintain internal controls to be able to confirm to applicable authorities the identification of clients and their source of wealth and to check from time to time if the transactions carried out by their clients are compatible with the clients’ respective net worth. If transactions are suspected of being money laundering, they shall be reported to the relevant authority, without liability to the person filing the applicable report.

The new regime is subject to debate as it broadens the scope of the persons affected and who are required to adopt internal controls and report suspicious transactions. Lawyers are still discussing if and how the new rules will affect their practice in light of attorney–client privilege, while other institutions discuss the new requirement for them to have their affiliates abroad report transactions undertaken by Brazilian clients abroad that might be suspected of money laundering.

Further guidance and regulations are expected to be issued by the Brazilian authorities in connection with the new changes, but the reality is that market participants will face new challenges from now on.

iv International exchange of information and double taxation treaties

Brazil has entered into exchange of information agreements (still not in force) with the following countries: Bermuda, the Cayman Islands, Guernsey, Jersey, the United Kingdom, Uruguay, Switzerland and Jamaica.

Brazil entered into a single tax information exchange agreement with the United States in March 2007, which came into force on 17 May 2013. The agreement provides for exchange of information on request, and not automatically or spontaneously.

In 2014, Brazil and the United States signed a Model 1 intergovernmental agreement to improve international tax compliance and to implement FATCA, which has been in force since 24 August 2015.

With respect to multilateral initiatives, Brazil signed the Organisation for Economic Co-operation and Development (OECD) Multilateral Convention on Mutual Administrative Assistance in Tax Matters (the Convention), which will enter in force on 1 October 2016. The Brazilian Congress issued on 14 April 2016 the Legislative Decree No. 105/2016 approving the Convention, and on 1 June 2016 the Brazilian government deposited at OECD the instrument of ratification of the Convention. The Convention requires parties to exchange information on request and spontaneously, and also allows parties to establish mechanisms for automatic exchange.

In the meantime, Brazil has already developed internal mechanisms through Normative Ruling RFB No. 1,571/15, in effect since 3 July 2015, which already enables it to exchange tax information in connection with FATCA. Such ruling created a periodic electronic form, named ‘e-Financeira’, which shall be delivered by Brazilian financial institutions to the Brazilian Inland Revenue with respect to certain financial transactions carried out by their clients.

In addition, the signing of a cooperation agreement between the OECD and Brazil on June 2015 (still not in force) underscores the growing strength of the relationship between Brazil and the OECD.

Brazil is involved in the OECD global tax agenda and is a base erosion and profit shifting associate. Together with other jurisdictions at the meeting of the OECD Council on 6 May 2014, Brazil took an important step towards greater transparency and avoidance of tax evasion through the execution of the Declaration on Automatic Exchange of Information in Tax Matters, with the purpose to enhance its commitment to tackle cross-border tax fraud and tax evasion and to promote international tax compliance through mutual administrative assistance in tax matters.

Brazil is a signatory to several bilateral tax conventions to avoid double taxation of income and capital that, in principle, follow (though with some important deviations) the OECD Model Tax Convention. The OECD Model Convention contains articles relating to the exchange of information.

As indicated above, Brazil also has conventions to avoid double taxation of income and capital currently in force.

V CONCLUSIONS & OUTLOOK

Wealth and succession planning for Brazilian high net worth individuals continues to be in demand, especially in light of the Regularisation Programme, increases in inheritance and gift taxes and capital gains tax. However, careful consideration should be given to the matter by those involved, as Brazilian tax authorities and administrative tax courts have been adopting a stricter attitude towards tax planning; in some cases the lawfulness of transactions based on the legality principle, which is one of the pillars of the Brazilian tax system, has not been considered a good enough reason for their acceptance, as it used to be.

In recent years, tax authorities and administrative tax courts have increasingly adopted the business purpose doctrine, rejecting transaction structures with no economic reasons or level of substance.

In the past, upon the analysis of tax assessments, Brazilian tax courts used to discuss whether the transaction complied with applicable laws and whether any legal provision had been violated. Currently, apart from being legal, to be acceptable transactions must be motivated by reasons other than tax savings. Because of this change in orientation, most recent decisions on tax planning reviews have involved deep discussions on the concept of business reasons and on the evidence of their existence.

At the same time, tax authorities have increased enforcement of the law and are carefully reviewing tax planning structures adopted by companies and individuals. The Brazilian Federal Revenue created a special group responsible to follow up and supervise high net worth individuals and transactions affecting them.

 

Footnotes

1 Humberto de Haro Sanches is a partner at Ulhôa Canto, Rezende e Guerra Advogados.

2 Brazil has conventions in place to avoid double taxation of income and capital currently in force with the following countries: Argentina, Austria, Belgium, Canada, Chile, China, the Czech Republic, Denmark, Ecuador, Ethiopia, Finland, France, Hungary, India, Israel, Italy, Japan, South Korea, Luxembourg, Mexico, the Netherlands, Norway, Peru, the Philippines, Portugal, Slovakia, South Africa, Spain, Sweden, Trinidad and Tobago, Turkey, Ukraine and Venezuela. Double taxation treaties signed and not in force include those with Paraguay and Russia.

3 Brazil formally recognises the availability of reciprocity with the United States and United Kingdom, but the taxpayer is entitled to demonstrate the reciprocity with regard to other countries.

4 Stock mutual funds must have a portfolio composed of at least 67 per cent of shares, convertible debentures or warrants issued by Brazilian publicly held companies or investments in other stock mutual funds.

5 Except for day trade transactions (applicable rate of 20 per cent).

6 Brazil is not a signatory of the Hague Convention on the Law Applicable to Trusts and their Recognition by Civil Law Countries.

7 In principle, Brazilian forced heirship rules do not impose limits to succession plans involving life insurance or pension funds because of the fact that such life insurance or pension funds are not deemed part of the deceased’s estate under Brazilian law.

8 Funds of funds are investment funds the purpose of which is to invest in other types of investment funds.

9 The list previously included: (1) drug trafficking; (2) terrorism; (3) trafficking of weapons, ammunition or material for their manufacturing; (4) extortion through kidnapping; (5) crimes against the public administration; (6) crimes against the financial system; and (7) crimes committed by a criminal organisation.